Land sales help raise profit at Tongaat

Business News / 27 May 2014, 08:00am

Nompumelelo Magwaza

Tongaat Huletts.photo supplied

Johannesburg - The momentum in land sales and growth in starch operations helped grow Tongaat Hulett’s operating profit 11 percent to R2.3 billion, the company said yesterday as it reported results for the year to March.

The group posted a 9 percent increase in revenue to R15.7bn. Headline earnings grew 4 percent to R1.1bn with the sugar producer declaring an annual dividend of R3.60 a share, which was 6 percent higher than the previous year’s R3.40.

Tongaat Hulett, which has property development interests, sold a total of 259 developable hectares of land to a wide range of owners.

About 63 developable hectares were sold at an average profit of some R7.6 million per developable hectare in Umhlanga Ridgeside, Izinga, Cornubia industrial and business areas. Another 6ha of land was sold to a single developer in Umhlanga Ridge Town representing about R24m of profit per developable hectare.

Tongaat Hulett also sold a big block of 190ha of land to Dube TradePort.

The group’s chief executive, Peter Staude, said Tongaat Hulett had about 8 200 developable hectares available and earmarked for development.

“The land conversion programme is a long-term activity rather than a short-term one. We had a lot more momentum last year than before and we expect the momentum to continue within the next few years,” he said.

He said Tongaat Hulett had 8 200ha that it wanted to develop. “We are saying that over the next five years, if the economy and business are like they are at the moment, we expect anything between 1 000ha and 1 500ha to be developed.”

Regarding land invasion incidents in the Zimbabwean operations, Staude said Tongaat Hulett was working with the government to resolve these issues.

He said some processes, including people being arrested and fined over the illegal land invasion incidents, had taken place already. “Our focus remains on the orderly development of sustainable private sugar cane farmers.”

He said at end of the 2013/14 season, about 813 indigenous private farmers, farming on 14 000ha of land and employing more than 6 700 people, managed to supply 1 million tons of cane. These farmers managed to generate about $58m (R596m) in annual revenue.

The starch operations grew operating profit to R482m from R388m last year as they benefited from competitive local maize and also from favourable exchange rates and good co-product realisations.

Total sales grew 4 percent, driven by increased exports and growth in the coffee creamer sector, which offset declines in other local sectors.

Operating profit from the various sugar operations totalled R908m, lower than the R1.4bn generated last year. The group attributed this to a number of factors, including the world sugar price being at its lowest level in many years.

In the regional market, Tongaat Hulett said substantial sales were lost to imports. However, Staude said the industry was starting to see a decrease in imports as a result of protective measures put in place by the South African and Zimbabwean governments. “Recently instituted measures in Zimbabwe to protect the local market… are expected to yield benefits.”

The Trade Administration Commission of SA announced last month that the domestic dollar-based reference price for sugar be increased from $358 a ton to $566 a ton, resulting in a duty fee of R1.32 for each kilogram of sugar.